A company that focuses on research and development (R&D) is interested in the relationship between profit and some variables that can explain profit variations. They want to predict the profits of some new and exciting projects because some are risky. The predictor variables considered are: RISK which is a company derived metric, R&D which is the research and development costs, REGION (WC, EC and KZN) and average per capita income (INCOME in R1000.00). The analyst decides to estimate the regression function with the following response function. Ý (profit) = bo + b₁XRisk + b₂XR&D +b3Xwc + b4XEC + b5 XINC Answer the following questions. 4.1. The analyst considered the fact that the effects of multicollinearity may influence some analytical

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
18th Edition
ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter4: Equations Of Linear Functions
Section: Chapter Questions
Problem 4SGR
icon
Related questions
Question
A company that focuses on research and development (R&D) is interested in the relationship between
profit and some variables that can explain profit variations. They want to predict the profits of some
new and exciting projects because some are risky. The predictor variables considered are: RISK which
is a company derived metric, R&D which is the research and development costs, REGION (WC, EC
and KZN) and average per capita income (INCOME in R1000.00).
The analyst decides to estimate the regression function with the following response function.
Ý (profit) = bo + b₁XRisk + b₂XR&D + b3Xwc + b4Xec + b5XINC
Answer the following questions.
4.1. The analyst considered the fact that the effects of multicollinearity may influence some analytical
and visual conclusions. Use the following results to show the process of establishing by using
extra sums of squares whether there is that multicollinearity present or not. Explain and interpret
in detail.
SSR(X) = 2573.72, SSR(X₁) = 2600.7, SSR(X₂| X₁) = 1573.72, SSR(X₁| X5) = 400.2.
Transcribed Image Text:A company that focuses on research and development (R&D) is interested in the relationship between profit and some variables that can explain profit variations. They want to predict the profits of some new and exciting projects because some are risky. The predictor variables considered are: RISK which is a company derived metric, R&D which is the research and development costs, REGION (WC, EC and KZN) and average per capita income (INCOME in R1000.00). The analyst decides to estimate the regression function with the following response function. Ý (profit) = bo + b₁XRisk + b₂XR&D + b3Xwc + b4Xec + b5XINC Answer the following questions. 4.1. The analyst considered the fact that the effects of multicollinearity may influence some analytical and visual conclusions. Use the following results to show the process of establishing by using extra sums of squares whether there is that multicollinearity present or not. Explain and interpret in detail. SSR(X) = 2573.72, SSR(X₁) = 2600.7, SSR(X₂| X₁) = 1573.72, SSR(X₁| X5) = 400.2.
Expert Solution
steps

Step by step

Solved in 4 steps

Blurred answer
Recommended textbooks for you
Glencoe Algebra 1, Student Edition, 9780079039897…
Glencoe Algebra 1, Student Edition, 9780079039897…
Algebra
ISBN:
9780079039897
Author:
Carter
Publisher:
McGraw Hill
College Algebra
College Algebra
Algebra
ISBN:
9781938168383
Author:
Jay Abramson
Publisher:
OpenStax
College Algebra
College Algebra
Algebra
ISBN:
9781305115545
Author:
James Stewart, Lothar Redlin, Saleem Watson
Publisher:
Cengage Learning
Algebra & Trigonometry with Analytic Geometry
Algebra & Trigonometry with Analytic Geometry
Algebra
ISBN:
9781133382119
Author:
Swokowski
Publisher:
Cengage